4. 5.
What blend of structural What change journey
and executional changes
does the company need?
Most companies strive for the proper
balance of structure and execution that
drives operational excellence. It’s not an
easy equilibrium to achieve. Given the
opportunities and threats presented by
the recent global financial crisis, we are
now seeing many companies in Japan,
Korea, India, and China seeking to place
much greater emphasis on regional
and global operating models and better
balancing their efforts across execution
excellence and operating model
changes. At the same time, we
are also seeing many companies in
developed economies focusing on
execution excellence while evolving
their operating models to better
compete in a changing world.
DuPont, for example, increased its
emphasis on cash generation in 2009
as it sought to maintain its financial
strength during the recession. A
main driver of the cost savings was
a corporate reorganization in which
the company integrated 23 strategic
business units into 13 businesses,
removing layers of management and
moving decision-making closer to its
customers. The restructuring also helped
the company to generate $3.4 billion in
free cash flow and achieve $1.1 billion
in fixed cost productivity.
At the same time, however, the
company did not pull back on
its innovation execution. DuPont
introduced more than 1,400 new
products in 2009—about 60 percent
more than in 2008—and filed more than
2,000 U.S. patent applications, the most
ever in a single year for the company.
15
will achieve operational
excellence?
It is not enough for executives to
know where they plan to take their
organizations, or the proper blend of
structural and executional excellence
they hope to achieve; how they
make those journeys will also have a
significant bearing on their companies’
eventual positioning. Choosing an
appropriate “change journey” is non-
trivial because each company has a
different context for change, a unique
starting point and its own “corporate
DNA”—all of which influence the type
of journey that will work best for
the organization. Business leaders at
chemical companies are no exception;
they must select the appropriate change
journey with care and embark on it
with wholehearted commitment and
full preparation.
Accenture has identified three main
types of change journeys (see table to
the right). For every company and every
leadership team, there will be, in theory,
one optimal response to discontinuity—
one “journey” that best suits the
company’s culture and positions it for
survival and/or leadership (Exhibit 5).
Exhibit 5: A range of factors influence the change journey
Structure Tax Efficient
Operating Models
Global Shared Services
Operating Models
Execution/
Structure
Balance
Process Innovation/
Optimization
Lean Six Sigma Execution
Continuous
Execution Improvement
Incremental
The three main “change journeys”
1. Continuous improvement focuses
on building bottom-up process
excellence step by step. This change
journey usually involves a large number
of small initiatives dispersed across
the organization in order to build an
ongoing change capability. Continuous
improvement efforts are typically led
by divisional or geographical leaders
and yield quick benefits, require small
relative investments and tend to
become a natural part of doing things.
This journey best suits an organization
that believes it has a solid target
operating model defined and that tends
toward decentralization of authority to
carry the model out.
Global Operating
Model Re-Invention
R&D
Operations
HQ
Simplification
Global Operations
(SCM) Strategy
Lean Six Sigma
Capability Building
Magnitude of Change
2. Transformational programs
involve top-down, largely structural
change. Here, the journey involves
change on a grand scale, almost
always with complete reinvention of
the operating model and big shifts in
the organization’s structure to sync
up with the business strategy. In a
company that has the right DNA and
the right C-level leadership to drive the
program, transformation is usually the
fastest way to implement big change
and to leapfrog the competition.
Transformational
Programs
Lean Transformation
Regional Operating
Models
Targeted
Interventions
Step Change
3. Targeted Interventions involve
functional improvement programs
across structure and execution. This
is the most common type of journey,
aimed at focusing on the area of
greatest need that will yield clear
return on investment. There is typically
a compelling reason to change—a
threat caused by a market or industry
discontinuity, or a new opportunity for
growth—along with a sense of urgency.
In this type of journey, an organization
decides to make big changes to its
operating model, but chooses to do
it a piece at a time in order to lessen
the risk of the change initiative.
16
 Operational Excellence:
Leadership Perspectives
“We will continue to rigorously
apply the financial discipline
and operational excellence
needed during one of the most
challenging economic periods
ever seen.”
Ellen Kulmann, CEO, DuPont
17
Determining the Right Path
The complexities of markets, customers,
business units, and departments mean
that most companies will attempt
more than one approach to achieving
operational excellence. Some senior
managers will argue persuasively
for discrete incremental efficiency
programs, while others press
equally powerful arguments for
wide-ranging, highly public, multi-
year transformation initiatives.
So how do companies know which
journey to take? Companies that
successfully reach higher planes of
operational excellence work through
three key steps:
1. They assess the operating models
they will need. Leadership teams should
be very clear about the discontinuities
that are the primary catalysts for
their change journeys. They then can
work through a diagnostic exercise to
assess their current operating models
and to validate their target operating
models. The focus here is on both the
strategic operating models that define
their capabilities in the face of the
discontinuities and on the operating
models that emphasize improving
efficiencies in existing business
processes.
For global companies, choosing the
right operating model requires a set
of thoughtful tradeoffs between the
need for local market agility vs. global
scale in processes and capacity, the
cultural acceptance of standardization,
the availability of talent, and other
factors. The right operating model is
a function of a company’s response
to global market changes and the ability
of leadership teams to evolve and grow
as they balance being both super global
and super local.
2. They are realistic about choosing
the right journey. Making clear-eyed
comparisons of their “to be” and current
operating models, companies can more
easily select the change journey that is
most likely to be successful for them.
Their choices are determined largely
by the company’s own characteristics—
its capacity for change, the skills and
experience of the leadership team,
its openness and transparency, its
goals and expectations, its operating
efficiency, and more—as well as by the
personal characteristics and leanings
of its top managers.
3. They take steps to improve the
odds of executing well. With the
change journey selected, operationally
excellent companies pay close attention
to the factors that improve the odds
of execution success—putting in
place the right governance systems,
appointing the right staff to the right
teams, establishing the right incentives,
identifying the most crucial project
milestones, and tracking progress
against them.